The Foschini Group (TFG) is reaping benefits from IT cost transparency, delivered by Keyrus. The leading business data intelligence and digital consultancy implemented a globally-recognised IT financial management (ITFM) solution, MagicOrange, at the retailer three years ago and has partnered with the organisation on its digital transformation journey ever since.
“The Foschini Group is now a long-standing, valued customer who is constantly looking for the latest progressive technology solutions to ensure its competitive advantage and future growth,” says Adam Walker, General Manager of Keyrus. “We hope this partnership will remain as strong for many years into the future.”
JSE-listed TFG is one of SA’s largest retailers and has a diverse portfolio of 29 leading fashion retail brands. It trades through more than 4 200 outlets in 26 countries across five continents. Their brands offer a variety of lifestyle products including clothing, jewelry, cellphones, accessories, cosmetics, sporting apparel, homeware, and furniture, offered both in-store and online.
Absence of cost transparency
The independent chain-store group found that the size and complexity of its business required a particularly robust, granular cost transparency model that would enable it to bill the various areas of the business for the costs directly associated with the services they consumed.
At that stage, TFG had no accurate product and service catalog, and only very limited cost allocation models.
Their cost transparency journey began in 2018, when the retailer was looking to better understand its profitability and costs.
“It was essential for TFG to gain visibility into a more accurate return on capital employed (ROCE) per brand,” explains Marlize van der Westhuizen, Finance Shared Services Manager TFG. “For example, we needed to determine earnings before interest and taxes (EBIT) after shared services cost allocations for each of the brands, rather than having to rely on this metric at a consolidated group level alone.
“Since TFG had no real cost transparency solution and a very limited chargeback model to its various brands, the group clearly required not only the right solution but also the relevant expertise to introduce an effective cost transparency discipline into the enterprise,” she says.
Financial management solution deployed
Financial management of shared services, and specifically ITFM, is one of the key competencies that set Keyrus apart from the competition. Keyrus is a tool-agnostic consultancy that prides itself on selecting the best technology tools to meet clients’ business challenges. It partners with best-in-class technology solutions and, for this implementation, recommended a Gartner-recognised progressive ITFM solution, MagicOrange.
MagicOrange has gained a strong position in the market for ITFM solutions and is recognised as a unique global offering by the independent research by Omdia in October 2021.
As part of the solution, Keyrus provided consulting services and assisted the retailer to define their ITFM vision as well as develop a roadmap.
The first requirement was to create a complete product and service catalog, which the Keyrus team helped to build from scratch, based on relevant input from the various business areas.
“The existing models for the allocation of costs were very limited and not consistently based on operational drivers,” explains Adam Walker. “This meant that every product and service required a driver to be sourced and incorporated into the MagicOrange model. In addition to the development of these drivers, the implementation included training to ensure employees understood both the nature and fairness of the drivers.”
The first phase focused on the customer’s IT, Logistics, and Facilities Management budget stack, an individual stack that nonetheless had a substantial budget. This core model was delivered in a mere eight weeks, despite being driven from a zero base.
Van der Westhuizen notes that reciprocal charging was properly modeled and catered. Fully loaded and accurate TCOs for products and services across the organisation were also made available.
Finally, scenario modeling was implemented, which enabled multiple scenarios to be loaded, including a range of different budgets, actuals, and forecast data.
Insights into costs
Following this implementation, TFG was able to show accurate profit margins; calculate the total cost of ownership (TCO) of its IT, logistics, and property investments; ensure accurate chargebacks, and utilise its assets more effectively. Many of the previously manual processes are now automated.
The group is benefitting from insights into the costs of delivering IT and services to the group, as well as the ability to accurately assign costs to users of IT services. For the first time, IT is able to properly explain these chargebacks with accurate, detailed reports.
In addition, scenario modeling assists TFG to make both strategic and tactical informed decisions. Rollout to the rest of Head Office service divisions has commenced to include them in a chargeback model. The initial models are being simplified further.
“In the end though, the two biggest game-changers for us were the manner in which Keyrus brought together the cost transparency and a credible recharge model based on consumption of services, as opposed to just a cost allocation model,” says van der Westhuizen. “This further assisted us to optimise costs and calculate ROCE at a brand level.
“The Keyrus team fully delivered on our challenges and exceeded our expectations in the way they understood and cared for our business success,” van der Westhuizen concludes.
“Our team of experts is equipped to enable true digital transformation,” says Greg Guye, CEO at Keyrus. “We aim to move companies away from tedious manual intervention through automation.
“TFG has been a customer of ours since 2018. Following the cost transparency implementation, the scope of work has evolved into an ongoing project and we have been extremely privileged to be TFG's partner of choice in this ongoing business transformation,” concludes Greg Guye.